Tag: t_bizTime

%%take@6 levels@ffree #minimalist/tenuous

Posted on by tiger40490

https://www.forbes.com/sites/davidrae/2019/04/09/levels-of-financial-freedom is the best among 5 articles I have read, all from the US perspective. There are many hints of “ffree as a state of mind” even if you choose to keep working for purpose, engagement,,,

Some may refer to my ffree as tenuous ffree / barebones ffree, fledgling ffree or minimalist ffree.

— Level 2 means “quit your job for a break, if not permanently”.  This level of freedom is … (extremely) valuable when you worry about bench time i.e. temporary job loss.
— Level 3 is valuable yet neglected. “immense sense of relief when you are earning enough to save, doing the things you enjoy and still having extra at the end of the month.” I think a majority of the audience (Americans and other nationalities) of this article experience real difficulty saving consistently. I achieved Level 3 long ago.
— Level 4 (time freedom) is the least appreciated level, important to me and many of my fellow busy dads. More time with family, more paid leave, flex time, shorter commute, WFH

— Level 5 basically means “downsize your current lifestyle to a basic/modest retirement”. It matches my bare-bones ffree. It also matches the crbr 3k/M plan.
This bizTime analysis of burn rate probably corresponds to below Level 5.

— Level 6 means “retire at the current lifestyle“. I feel for many of my U.S. peers, this is a huge gap above Level 5, unless your current burn rate happens to be modest, like mine. (Level 7 or above is irrelevant and unneeded .. unnecessary luxury)

  • Claim: you need to invest in stocks since young.
  • Observation: many countries’ public pension-like system pays you only a fraction of you “current” burn rate. My parents pensions are adequate.
  • My Rule #1: be realisitc about retiring in style (Level6), and don’t aim at current burn rate. Excluding healthcare and housing, aim at half the current burn rate.
  • My Rule #2: from young age, take up the legwork to find long-term solutions for old age housing and healthcare.

As to stock investment, I don’t know the reliability for the purpose of long-term cash payout. What if you buy at the peak, and need to wait 20Y for a recovery? If I give myself 30-40 years of accumulation, I think only U.S. stocks are able to clear that high bar.

======= original publication =====
When you read articles about financial freedom, you may hear people drone on and on about how they are spending practically nothing so they can retire at a younger age, like 30. Conversely, they may have already achieved financial freedom and are bragging about how frugal they were so they could retire well before the typical retirement age.

This is what I hear. Sell all your stuff, except for a tent, and move to the woods so you will never have to pay rent or utilities again. Joking aside, I actually come across a blog that promoted dumpster diving for food. No thank you! Realistically, most of us will not want to do the things required to retire at 30, 40 or 50. In fact, many people who are reading this likely are not saving enough to maintain their current standard of living during their golden years, if they retired at the age of 70. It pains me to report that about 21% of people have zero, zilch, nada saved for retirement, according to the Northwestern Mutual’s 2018 Planning & Progress Study.

Planning for retirement, or even financial freedom, is a marathon and not a sprint, as the saying goes. Breaking up your financial independence goals into small chunks can help keep you on track while making the process a bit more manageable and, hopefully, a little less stressful. Even if you are starting small, the important thing is to get started.

Here are the seven levels of financial freedom that you should work towards achieving.

— Level 1: Not Living Paycheck to Paycheck
The first level of financial freedom is building up an emergency fund. Ideally, this will include paying off any credit card debt as well.

Unfortunately, living paycheck to paycheck is the reality of millions of Americans. According to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2017, some 40% of households could not cover a $400 unexpected expense. Most of us will have some unexpected bills pop up throughout the year such as car repairs, medical bills and nights out drinking with friends. Having an emergency fund will come in handy during those types of situations.

— Level 2: Enough Money to Quit your Job (for a bit)
Financial freedom is all about making work an option. Saving enough money to quit your job forever is a huge undertaking. Accumulating enough money to be able to take some time away from working is a big jump in that direction. This does not mean you have to quit your job, but it sure is a good feeling to know you can.

For extra credit you may want to save up for a sabbatical or extended vacation. I dream of spending a month, or two, in a foreign country each year. By no means will I be quitting my job, but it would take some planning in order to be away from my financial firm for that long.

In the shorter term, that extra money could also serve as your emergency fund. I mentioned that just in case some of you wanted some extra motivation to get to this level.

— Level 3: Enough to be Financially Happy and still Save
This is a bit more about enjoying your life and having the money to do it. There is an immense sense of relief when you are earning enough to save, doing the things you enjoy and still having extra at the end of the month.

That extra cushion can be used to move up your financial freedom date. That of course assumes you avoid increasing your lifestyle and spending it.

— Level 4: Freedom of Time
What many people desire is more flexibility with their schedules. Freedom of time and financial independence go hand in hand. Together, they are about leaving the rat race to follow your passion, or spend more time with family, and not going completely broke doing it. It could come in the form of more paid time off, flex time or perhaps working remotely on occasion. Not having to take a day off from work just so you can visit the dentist or take your kid to the doctor could be a huge benefit for some.

— Level 5: Enough for a Basic Retirement
Do you know anyone who hates their job? I mean really hates it. I have met a few over the years as a financial planner. Those individuals were willing to do almost anything to retire as soon as possible. Some considered things like moving to a foreign country with a low cost of living, selling their home or getting roommates. I should point out that those people were closer to full retirement age.

For those of you looking to retire early with financial freedom, think about what your bare minimum retirement would look like. Could you move to a place with a lower cost of living? Would you give up going out to dinner? Work towards a nest egg that will support this bare-bones lifestyle. You probably will decide against moving to that cabin in the woods without running water, but it might be nice to know you could. Considering your bare minimum retirement, and knowing you have enough money saved to at least cover some standard of living in your early retirement, will also influence other life choices you may make along the way.

Would you lease a new luxury car if you knew it meant you would have to work a few more years? Downsizing your house might look more appealing if it meant you could retire now rather than in 10 years.

— Level 6: Enough to Actually Retire Well
Assuming you are doing pretty well and are happy with your current standard of living, what would you need in order to maintain your standard of living in retirement? Knowing you are on track to accumulate a nest egg to support that lifestyle is a big win. Gold medals go to those who have accumulated enough assets, or passive income streams, to be in a position to retire well.

[20]brbr: 80LMHI[def]: R.Teo #wbank^BT^FIRE #Khmer

Posted on by tiger40490

update:

In contrast to

  1. barebones ffree=realistic: BT^YLZ ^CPF #w1r6 — voluntary barebones ffree burn rate
  2. covid19$$handout reflect`Realistic burn rate — temporary, covid19-induced involuntary jobless burn rate

, this blogpost discusses a burn rate possibly even lower — 80LMHI [80% of the local medium household income]. See also

Background: A major pillar of my carefree bliss is the fierce /boycott/ to FOMO/kiasu, exclub, so-called 上一个台阶, benchmark with the MDs, chasing the “latency” endless goal,,,, I tell myself and myf kids that we don’t need even more money once we have enough nonwork income to support a certain burn rate. That is somewhere below Level5 of  6 levels@ffree #American perspective.

However, if you have not experienced deprivation, consider the comfortable and happy Khmer villagers we saw on our last day at Siem Reap, described below. Clearly, each person has a tolerance threshold. Question: What’s yours?

The answer to this question is fairly personal. This requires us to keep an eye on the bare essentials i.e. the essential things in our life, and resist lifestyle creep, and resist kiasu/FOMO/benchmarking.

My tentative answer to this question: I would reference 80% of the median family income among families of a comparable size regardless of ethnicity. (Singlular household data points are automatically filtered out.)

80% of median kinda define the “thrifty middleclass” lifestyle.

— Raymond’s 2013 comment sowed the seed for this answer. Raymond said “Now you have left high-salary WallSt and returned to Singapore. You should start living like the ordinary Singaporean family, unless you continue to draw the WallSt salary.”

If you earn the median family income, and  want to save 20% every month, then your burn rate must be 80% of the median income.
— The Khmer villagers:
Some cultures in SEA, Latin America, and some Buddhist cultures are more satisfied, less progressive than the East Asian and Western cultures. Some ethic groups may be lukewarm about the latency arms race

Unlike the Chinese, these cultures don’t mind FOMO or lagging behind on the curve. They don’t envy that much.

Buddhist monks might be a better reference, but I like my vivid first-hand observations. My Cambodia Chinese tour guide said rural Cambodians have a more satisfied life, perhaps surviving on subsistence farming, fishing. Not sure if they need education and healthcare, which are presumably non-essential luxuries beyond their reach.
— FIRE: I think the burn rate in this blogpost is still higher than the extremely low yet adequate burn rates featured in the ERE and MMM discussions.

Mr Money Mustache, Pete Adeney, with a $2k/M burn rate, wrote “Once you find out the true meaning of enough, buying yourself more than enough doesn’t really make you any happier,”…. “And here in the United States, even a lower middle class level of income is way more than enough to pay for a happy life  – as long as you spend it right.”

ERE author at about USD 700/M is more extreme in his burn rate and in his DIY enthusiasm.

I’m more like Pete i.e. MMM than Jacob of ERE.
— World Bank poverty line for the rich countries is USD 22/day or USD 660/M, similar to the ERE author. In Singapore, If we keep taps on our burn rate, then this level of bare-bones ffree is not unrealistic, largely thanks to Medishield.

At my level of abstinence and discipline, projected family burn rate is SGD 2k/M.
— SG official statistics: SGD 7k median household income from work (excluding employer CPF contribution or nonwork incomes) implies that after cpf deduction, 50% of the Singaporean households only have below SGD 6k/M to take home. Many (more than 33%) households have 4k take-home income only.

Even if my family income becomes median, my expenses are likely lower thanks to no-mtg, no-car, no-maid. In such a case, my savings and brbr would still be above median.

Beware: some low-income households have no kids. A subset of those are singular households such as me in 2004-2006. In contrast, the median “nuclear-family” income is higher.
— The Business Times FIRE article described a max-savings lifestyle, not too different from mine.
SGD 2500 family burn rate excl.housing/driving #BizTimes is another blogpost based on the same article. I feel this figure is close to my 2020 recorded burn rate if excluding insurance, enrichment, flight,,,
— SG vs U.S.
In Singapore, My minimum standard is basic-healthy, at SGD 2.5k/M for my family. This is likely to induce a sense of deprivation in my kids. If it does, then we can reduce some of the insurance coverage

In the NY/NJ, the basic-healthy burn rate might be USD 4k/M, including a company health insurance + a basic car. See my blogpost on U.S. peers’ burn rate

20%savings rate^creep #mainstream advice

Posted on by tiger40490

k_bizTimes

Shall we merge this with the longer blogpost Creep [def]: unnecessary finer-things-in-life #R.Teo ? No… this title is still needed. I feel the effort to merge them is not so worthwhile. Perhaps wait for a few years and then downsize one of these 2 blogposts.

Household savings rate is an economic concept and includes the dollars you pay towards your mortgage Principal (but not credit card interests). Basically, the unspent amount from each monthly pay cheque.

As reported by FinancialTimes in 2024,,, “In the Eurozone, people are still saving more than 14 per cent of what they earn — well above the historical average. But US consumers have spent almost all the extra money they put away during the pandemic, reducing their savings to less than 5 per cent of their income.”

Those countries are different… For the Singapore consumer, https://www.tiq.com.sg/blog/savings-vs-investment-differences-explained/ advocates minimum 20% savings rate. https://www.syfe.com/magazine/5-key-financial-areas-of-focus-that-singaporeans-in-their-40s-need-to-plan-for/ is written for the average Singaporeans in their 40’s and 30s :

To prevent “lifestyle creep” and to give you the cashflow you need to invest towards your retirement goals, you need to set and commit to a budget. A popular rule-of-thumb would be to save or invest 20% of your income, leaving 50% for necessities and 30% for non-essential spending like shopping trips and dining out.

“Lifestyle creep” is a useful short phrase, further explained in a related article https://www.syfe.com/magazine/your-30s-are-the-best-time-to-build-wealth-these-5-things-will-get-you-there/. I feel the 30% non-essential is often part of the creep. Even the 50% necessities often show the creep.

20% savings rate is commendable but not good enough for my goal. As a family I typically hit 40-70%. Earlier as a bachelor I hit higher but I won’t elaborate. On a bigger scale, the SG government is much leaner (and saves a lot more) than other rich countries.

— Q: at 20% savings rate, can you achieve ffree?
A: unlikely. Here’s a back-of-envelope calculation:

If you are spending 80% of 5k, I assume you want to continue this 4k burn rate. Then the 20% savings at a compound return of 4% would take a long time to grow to $1200k to generate $48k/Y or $4k/M payout. Inflation would further erode the buying power of this $4k/M.

I will not elaborate in this blogpost. See the other blogposts under t_bizTime.

 

[19]barebones ffree: kids inferiority, deprived@@

Posted on by tiger40490

Be prepared for prolonged hibernation (for boy). In one scenario, my family income might drop….

See also my blogpost

In contrast, this blogpost is more about deprivation.

— Q: among the three ffree scenarios, is the jobless scenario belt-tightening like 苦行僧, deprived –> kids feeling inferior to classmates?

A: As of 2020, the spending habits of my wife and kids imply a burn rate that is 50% higher than the $3k/M estimate in my bare-bones ffree. However, I have reason to believe that once kids grow up, my family burn rate will drop.

A: In my numerical analysis, I zeroed out luxury spend, mostly air tickets and restaurants, not the premium foods we buy from stores. In a jobless situation, I feel confident we Can make these adjustments and get used to it, over 2 years.

  • $100/M additional spend would provide creature comfort such as … nearby vacations, day tours
  • Remember, staycation hotels and restaurants are new to me and wife. Removing them is not deprivation.
  • In any city I know, there are plenty of high-quality free-entrance places for vacation. In fact, those commercial establishments requiring a ticket are usually smallish and artificial.
  • coffee shop 杂菜饭 (mixed vegie rice) is an example of frugal indulgence .. ##frugal indulgence ] SG 

A: In the Singapore context, S$2k/M is not abject poverty. In the U.S. low income might be more harsh… I can only imagine but my imagination is based on limited observations.

A: In any country, my kids would need to adjust and grow up as confident kids in spite of family income lower than classmates’.

  • me: Hi Mike, if you didn’t have your parents living with you as a kid, I wonder if you felt inferior to your peers in school.
  • Mike: Nope, I used it as ambition to do better than them.
  • me: I find it hard to believe. I saw this kind of fighting spirit and optimism only in movies
  • Mike: Its actually true
  • … I then shared with Mike my childhood experiences as the only kid without television at home. I felt deprived but survived.

— A: To live comfortably within SGD2k-3k/M, family member need to live like me — practice everyday mindful spending and restrict careless spending, similar to restricting calories. Basically, everything more than $10 needs a conscious decision. Tough? Easy for me.

On a deeper level, Freedom^Responsibility are two sides of the same coin. Responsible spending, Self-discipline and Living-within-means are necessary for financial freedom. Without them, even a $5k passive income would become “insufficient” sooner or later as you liquidate the income-generate asset.

The Business Times article described a max-savings lifestyle, not too different from me.

— globalization: food and clothing cost is reducing world wide, so is the minimum cost of living in SG. U.S. would require car ownership, even for a retiree !

Q2: but why is our monthly burn rate not reducing?
A2: I would say as a bachelor, my burn rate did reduce gradually, but as a family we all want the same level of luxury and creature comfort as our neighbors. We would FEEL impoverished and deprived if we can only afford to consume at the same level as 10Y ago (which has now become cheaper.)

This Q2 has implications on FIRE and bare-bones ffree.

Wife, as a mainstream consumer, wants to feel “affordable” when considering certain everyday “lifestyle” spend like a toy, personal care, home fixture, fancy food… If her friends can afford something, but I tell her “not necessary”, she would feel deprived. To me these “lifestyle” items are all unnecessary almost irresponsible, but I’m no purist either — look in the mirror! My wife is not a minimalist. Me? neither!

 

S$2500 family burn rate excl.hous`driv` #BizTimes

Posted on by tiger40490

I think household expenditure data is very hard to collect. Most households have no reliable [1] “system” to record expenditure. Big ticket items are often mis-classified as one-off.  Therefore, the practical estimate is an educated guess. A 2017 BusinessTime article entitled [[How to retire in 10 years]] shows an educated guess — a typical SG family spends SGD 2400/M assuming

  • target age group of this entire article is 35-44
  • with or without kids
  • take-home (after CPF) SGD 4k/M
  • mortgage payment not counted
  • non-driver

I think the target population is Chinese, Malay or Indian, including many families below the median.

[1] My system, XR’s system and grandpa’s system is fairly reliable.

— Brbr: this article assumes max-save i.e. Brbr = 3 to 5

yield^inflation(burn rate)during your semi-retirement

Posted on by tiger40490

BusinessTimes 16 Jan 2017 has a detailed analysis about retiring on 3-4% investment yield. (My savings rate is probably 60-70%) This analysis has a basic assumption — investment yield CAN keep up with inflation…. Really?

In the Singapore context I blogged about the 20Y inflation as I experienced. Relatively low.

As to investment yield in the form of dividends or fixed deposit interests… not so sure. In conclusion, I would say — inflation did erode but investment yield didn’t keep up 🙁

Therefore, I like rental property better. Rental income rises against inflation, with good reliability. (In fact, the capital appreciation also rises with inflation, but that’s topic for another day.)

Key thing in this plan — reliable passive income. I’m betting on 5-7%. I think mostly I need to rely on rental properties.